Friday, September 25, 2020

Study concludes minimum wage in Puerto Rico isn’t a problem

By on December 10, 2016

CAYEY – Dr. José Caraballo Cueto, author of an academic study on the minimum wage, concluded that contrary to what was exposed by the Anne Krueger report, the amount paid in Puerto Rico is not a problem for the economic development.

People protest Promesa's minimum wage provision in front of the U.S. District Court on Chardón Street in San Juan. (CB / José Antonio Rosario Medina)

People protest the P.R. Oversight, Management & Economic Stability Act’s minimum wage provision in front of the U.S. District Court on Chardón Street in San Juan. (José Antonio Rosario Medina/CB)

“It is believed that because it is a federal minimum wage, it is necessarily high for Puerto Rico because of the differences in levels of income between the United States and Puerto Rico. However, that argument ignores that the United States does not have a corresponding minimum salary: among the rich countries, United States has one of the lowest minimum wages. Using advanced statistics, I find that the last raise to the minimum wage does not generate unemployment. The job movement in Puerto Rico is very dependent on the movement of trade goods and services: with more production, more creation of employment will be seen and vice versa. Employment is not created so much from the offer, of the labor costs, but from the demand,” Caraballo Cueto commented in written declarations.

According to the doctor, the study, published in the Journal of Industrial Relations, finds that the last raise to the minimum wage brought a positive effect but resulted moderate on the total employment.

“The rise in the minimum wage provoked a raise in the acquisitive power of a great part of the population of Puerto Rico, creating more sales for many enterprises, which resulted at the same time in the need to hire more personnel. For the companies with high salaries, such as pharmaceuticals, the rise in minimum wage had no significant effect statistically. These findings contradict the Krueger Report (which was a study asked for by the current administration) where they argued that the current minimum wage in Puerto Rico is too high,” the investigator from the Interdisciplinary Investigations Institute from the University of Puerto Rico, Cayey campus, commented.

In the study they make reference to the academic debates on the impact of the minimum wage and it establishes that there exists a consensus in related literature on the positive effect of the minimum salary in lowering the economic divide between social classes. The study also points out that in the year 1969 Puerto Rico obtained the lowest unemployment rate in its modern history and in that year the minimum wage was proportionally higher than the current one. It is worth mentioning that in 1969 the minimum wage was legislated on a state level, as the federal minimum wage was adopted in 1977.

Read more: Rubio Introduces Legislation to Increase Wages, Expand Opportunity in Puerto Rico

Currently, it is debated in the United States whether the minimum wage should be raised to $15 an hour as many North American states and cities – as is the cities of New York and Seattle – have approved a minimum wage to this level. That federal legislation would have consequences in Puerto Rico.

“On one hand some pro-worker groups in Puerto Rico assure that the 15 dollars an hour are adequate and on the other hand, some conservative groups consider that the current minimum wage should be lower. However, none of these two propositions appear to base themselves on data: when the current minimum wage was last updated in the year 2015, I find that the minimum wage in Puerto Rico should be $8.61 an hour. It is important to chase that optimum minimum wage to improve the economic inequality that there is in Puerto Rico, which is among the worst worldwide,” the doctor in economy assured.

You must be logged in to post a comment Login